Lecture 5: Globalization and Development
2026-02-06
What do you think of when you think of “globalization”?
Globalization is the process of increasing interdependence and integration among the economies, markets, societies, and cultures of different countries worldwide. This is made possible by the reduction of barriers to international trade, the liberalization of capital movements, the development of transportation, and the advancement of information and communication technologies
Globalization is a complex phenomenon which involves the exchange of goods, services, information, technology, and people
Many of these components have a dedicated module
In this module, we will focus on the trade component of globalization
Growth of global trade
Waves of globalization
Bilateral trade
Distance and trade
Distance and trade
Not just physical geography, but how “fast to reach” a country is
Pascali (2017) shows that the first wave of globalization (1870-1913) was facilitated by the introduction of steam engines
They drastically reduced shipping times for merchant ships, which previously could only rely on wind
Studies that try to do causal inference on trade use some exogenous factor (related to geography) that reduces trade costs between two countries
For instance: distance, or changes in travel times as determined by changes in transport technology
Class activity
China’s trade partners
Class activity
Chinese import penetration in the US
Source: Autor, Dorn, Hanson (2013)
Goldstein, Rivers, and Tomz (2007) study the effects of GATT/WTO on trade between countries
Recap of the study:
From Goldstein et al (2007)
Do you think this study has broader implications for understanding the effects of institutions?
What do you think are the effects of trade on:
From Pascali (2017)
Democracies over time
Source: Our World in Data and V-Dem
Tabellini and Magistretti (2025) study this question
What can be the negative consequences of globalization (trade integration) on the economy? And on democracy?